ST : Govt acts to curb speculators

Aug 31, 2010

Govt acts to curb speculators

New restrictions expected to cool property market; prices tipped to soften

By Joyce Teo

A SERIES of sweeping measures designed to take the heat out of the booming property market and rein in investors and speculators were announced yesterday.

The buy-at-any-cost sentiment that has been boiling away in recent months is expected to take an immediate hit, with prices tipped to soften.

The restrictions, like cooling measures last September and in February, are designed to stop a housing bubble forming.

They target owners who try to sell - or flip - their properties for a quick buck, while those aiming to buy investment properties in addition to their existing home will find it far more costly.

The new rules - which came in yesterday - also make it harder for Housing Board and private home owners to dabble in each other's markets.

National Development Minister Mah Bow Tan, who announced the moves, told a briefing: 'We think that if we do nothing, there's going to be a bubble.'

He said the 'calibrated' steps would stabilise the private property market and prevent it from overheating.

With Singapore's strong economic growth expected to moderate in the second half, a property bubble will likely form if the current momentum in the market continues, said Mr Mah.

'And when the bubble bursts - not if - there will be severe implications for individuals as well as for the economy as a whole,' he said.

'Furthermore, the very low interest rates we are seeing today are not sustainable. And when they eventually rise... there will be severe implications for buyers who have overextended themselves.'

He said the Government had taken several small steps to cool buying sentiment, unlike its 'big-bang approach' in 1996, when tough measures like a capital gains tax caused a market crash.

'All the measures are meant to affect people who intend to buy and sell ... the speculators in the market,' he added. 'If you are a genuine buyer, if you are an owner-occupier, to all intents and purposes, these measures will not affect you.'

Property experts believe the new rules will hit sentiment instantly, with buyers likely to hold back while prices of private homes and resale flats stabilise or even fall over the longer term.

'We may have an extended Hungry Ghost Festival this year,' said Knight Frank chairman Tan Tiong Cheng.

But first-time buyers will have reason to celebrate, as they may find fewer potential buyers competing with them and, possibly, softer prices.

Civil servant Joshua Yap, 28, is one: 'I will definitely resume my house search after putting it on hold for the past few months. I am very thankful for the measures because they will serve to cool the irrational market.'

The Government is also bumping up the supply of public housing, including executive condominiums.

The private housing market has so far resisted two earlier rounds of cooling measures. Private home prices surged 38.2per cent in the year to June, exceeding the historical peak of 1996.

Experts say many local buyers have been maxing out loans, but the new measures may prove a spanner in the works.

Buyers already servicing mortgages must now fork out double the cash amount to buy a second property, so the mass market private homes segment will be hit, say experts.

'The impact will be huge for the mass market as this is where the buyers do not have that much cash,' said a developer, adding that the market for newly-launched, uncompleted private homes will be harder hit.

'For new project sales, I would say that the bulk of the buyers are those getting a second home. Now, upgraders will not be able to buy properties under construction if they don't have the cash and CPF savings for the 10 (per cent) and 20 per cent down payment respectively,' he said.

DTZ's head of South-east Asia research, Ms Chua Chor Hoon, said: 'Developers are likely to lengthen the period of ongoing previews and soft launches to test the market.

'The impact will be felt more in the public resale and mass market segments due to the double whammy of a cutback in demand and increase in supply.'

The Real Estate Developers' Association of Singapore said the new measures may affect affordability due to the higher upfront cash component, but will not hit genuine home buyers.

Cash-over-valuation levels in the HDB resale market are expected to dip, thanks largely to the huge upcoming supply of flats and a move barring private home owners from buying a resale flat while holding on to their private property.

Jones Lang LaSalle's head of research for South-east Asia, Dr Chua Yang Liang, believes yesterday's measures were motivated largely by the unabated rise in public housing prices. But demand should cool for HDB resale flats.

Some property consultants expect price rises for private homes to moderate. Jones Lang LaSalle forecasts that prices will now rise by 2-3 per cent per quarter for the rest of the year.

Others are less optimistic. Ms Chua believes mass-market prices will slip by a few percentage points over the next six months, citing the backdrop of uncertainty in the global economy, slower sales activity and growing price resistance.

Mr Tan added: 'When things are moving fast, there are people who feel that they are priced out of the private market. Now, their opportunity has arrived if prices flatten out or move south.'

Property share prices fell by about 4-5 per cent in reaction to the changes.

Asked if the new measures had to do with the upcoming general election, Mr Mah said: 'Housing has been a hot topic for as long as I can remember. (It is a) hot topic before all elections, and will be a hot topic in the next election, whenever that is.'

joyceteo@sph.com.sg


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'All the measures are meant to affect people who intend to buy and sell, ... the speculators in the market. If you are a genuine buyer, if you are an owner-occupier, to all intents and purposes, these measures will not affect you.'

Mr Mah Bow Tan